Fed Study Suggests U.S. Labor Market Rosier Than Thought

A new study by the Federal Reserve Bank of New York reveals that the employment-to-population ratio seems to exaggerate the Great Recession’s impact on the U.S. labor market and that the labor market may be closer to a full recovery than previously thought. The E/P ratio fell more than 4% from its average during the expansionary period prior to the recession and has stayed there, but when adjusted for changes to demographics, such as the mass retirement of baby boomers, researchers determined that the fact that the ratio has held steady for the past few years means the labor market has actually improved.

This indicates that mass retirement may have spurred a permanent evolution in the job market in the wake of the recession. Joseph Tracy, New York Fed executive vice president, and Samuel Kapon, senior research analyst, wrote, “The adjusted E/P rate corroborates the basic picture from the unemployment rate that the labor market has been recovering over the past few years, but that it still has a ways to go to reach a full recovery.”

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